Two years ago, the U.S. airline industry had six legacy carriers. A year from now, that number could be down to four if Continental and United have their way. The remaining legacy carrier CEOs have cited several potential opportunities and consequences of airline consolidation.
Also see: New United Divides BuyersAmerican Airlines CEO Gerard Arpey in a letter to employees this month said the proposed Continental-United deal "has the potential to change the industry landscape in a number of ways, some positive and some negative." On the positive side, Arpey argued consolidation stabilizes the industry. "A combined United/Continental would mean one fewer choice and may result in a better balance between industry supply and demand, potentially resulting in a more rational competitive environment," he said. However, American would face a competitor that surpasses it in size, a formidable threat considering that "network depth and breadth is a key element of airline competition today," Arpey said.
Though its merger talks with United were fruitless,
US Airways' Doug Parker remains an avowed pro-merger CEO, going so far as to say that even if United and Continental complete their deal, the "fragmented" domestic airline industry still would necessitate further consolidation. "It reduces fragmentation and creates efficiencies that allow the industry to better withstand economic downturns," Parker said. "That's good for all airlines, whether we all participate in consolidation or not. As it relates to US Airways, all things being equal, we would prefer to participate in consolidation rather than not. We've been very open about that point and aggressive in our actions. That does not mean that we need to participate." Parker said US Airways' discussions with United "may have helped motivate Continental to finally agree to merge with United."
As CEO of
Delta Air Lines, the last legacy carrier to seal a major merger with its 2008 Northwest Airlines acquisition, Richard Anderson last month during a first-quarter earnings call talked about the difficulty of pushing through a deal with regulators. "The transaction that we did was probably the quickest transaction of its size that's ever gone through the Justice Department," Anderson said, adding, "I don't think this environment is the same." The U.S. Departments of Transportation and Justice have been more aggressive under the Obama administration than under the Bush administration in reviewing airline deals. Anderson said the deal announced last August to trade some Washington National slots for US Airways' slots at New York's LaGuardia "has actually been pending longer than the merger of Delta and Northwest." Still, Anderson said the merger's swiftness required more than just a favorable regulatory environment. "We had at one time almost 270 lawyers between Northwest and Delta working on gathering documents" to satisfy regulators' requests, he said.